Moody’s Upgrades Neiman Marcus to ‘Stable’

Moody's rating for Neiman Marcus was lifted after the luxury retailer refinanced its credit agreement.

Neiman Marcus Inc. got a thumbs-up from Moody’s Investors Service, which switched its rating outlook on the firm to “stable” from “negative” after the company extended a $600 million credit agreement last week.

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The debt watchdog also upgraded the retailer’s speculative grade liquidity rating to “SGL-2” from “SGL-3.” Neiman’s corporate credit rating was kept at “Caa1,” indicating the firm’s debt is still “subject to very high credit risk,” according to Moody’s scale.

Neiman’s took advantage of some loosening in the credit markets and renegotiated its asset-based revolving credit agreement, pushing its maturity date back to January 2013 from October 2010. “This facility, combined with our current cash balance in excess of $250 million, provides us with ample liquidity to support the growth of our company,” said Jim Skinner, the retailer’s executive vice president and chief financial officer, when the deal was consummated last week.

Moody’s wasn’t quite as bullish, but was clearly thinking along the same lines Wednesday.

“This refinancing, along with the company’s healthy cash level, gives the company the financial flexibility to weather the current economic downturn,” said Moody’s analyst Margaret Taylor in the upgrade.

Taylor said the rating reflects both the pressure on Neiman’s earnings in a contracting marketplace and the company’s “solid competitive position” in the luxury sector.

Neiman’s doesn’t have any debt coming due until 2013, when the credit agreement expires and a $1.63 billion term loan matures.

Neiman Marcus was taken private in 2005, when it was acquired by Texas Pacific Group and Warburg Pincus LLC for approximately $5.1 billion.

Among publicly traded retailers Wednesday, the S&P Retail Index rose 3.08 points, or 0.9 percent, to 342.24, returning to positive territory after its first decline in seven sessions on Tuesday. The Dow Jones Industrial Average fell 0.4 percent to 8,881.26, while the Nasdaq Composite was up 0.5 percent to 1,926.38. The S&P 500 dropped less than 0.1 percent to 954.07. (For more on stocks, see page 14.)